Rayovac 2014 Annual Report Download - page 56

2014 versus $1,062 million in Fiscal 2013. This increase was attributable to the residential security category
which accounted for $91 million of the increase due to strong retail positioning in North America coupled with
the continued recovery of the U.S. housing market. The plumbing category increased $17 million while the
hardware product category decreased $2 million. The plumbing product category increased due to growth in the
U.S. from both retail and non-retail channels. Also contributing to the Fiscal 2014 sales increase were sales
related to the Tong Lung Metal Industry Co. Ltd., a Taiwan Corporation (the “TLM Business”), as prior year
results did not include the TLM Business until April 8, 2013.
Global pet supplies sales decreased $22 million, or 4%, during Fiscal 2014 versus Fiscal 2013, which
included a positive foreign currency exchange impact of $1 million. Excluding foreign exchange impacts, aquatic
sales and companion animal sales decreased $19 million and $4 million, respectively. The decline in aquatic
sales was driven by lower kit and equipment sales in North America and lower aquatic food sales internationally
coupled with a one-time negative impact from product registration issues in Russia during the third and fourth
quarter of Fiscal 2014. The decline in companion animal sales was driven by adverse weather in North America,
which negatively affected retail store traffic during the second quarter of Fiscal 2014, and the non-recurrence of
companion animal promotions that took place during the first quarter of Fiscal 2013.
Home and garden product sales increased $42 million, or 11%, in Fiscal 2014 versus Fiscal 2013. The sales
gains were attributable to increases in repellent product sales and lawn and garden control sales of $23 million
and $20 million, respectively. The repellent product sales increase was driven by market share gains, the
extended selling season due to favorable weather and a $13 million increase due to the acquisition of The Liquid
Fence Company, Inc. (“Liquid Fence”) on January 2, 2014. The increase in lawn and garden control sales was
primarily driven by distribution gains at key retailers and the extended selling season discussed above. These
gains were partially offset by a slight decline in household insect control sales of $1 million.
Gross Profit. Gross profit and gross profit margin for Fiscal 2014 was $1,569 million and 35.4% versus
$1,390 million and 34.0%, respectively, for Fiscal 2013. The increase in gross profit and improvement in gross
profit margin was primarily attributable to an increase in sales, particularly the shift towards higher margin sales,
and continuing cost improvements. In addition, the increase in gross profit margin was driven by the non-
recurrence of a $31 million increase to cost of goods sold due to the sale of inventory during Fiscal 2013 that was
revalued in connection with the acquisition of the HHI Business.
Operating Expenses. Operating expenses for Fiscal 2014 totaled $1,087 million compared to $1,039 million
for Fiscal 2013. The $48 million increase in operating expenses during Fiscal 2014 is primarily attributable to an
increase of $76 million in Selling and General and administrative expenses as a result of increased sales partially
offset by a $28 million decrease in Acquisition and integration related charges as a result of the HHI Business
acquisition in Fiscal 2013.
See Note 2, “Significant Accounting Policies—Acquisition and Integration Related Charges,” of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information
regarding our Acquisition and integration charges.
Segment Results. As discussed above, we manage our business in four reportable segments: (i) Global
Batteries & Appliances; (ii) Global Pet Supplies; (iii) Home and Garden Business; and (iv) Hardware & Home
Improvement.
The operating segment profits do not include restructuring and related charges, acquisition and integration
related charges, interest expense, interest income and income tax expense. Corporate expenses primarily include
general and administrative expenses and global long-term incentive compensation plans which are evaluated on a
consolidated basis and not allocated to our operating segments. All depreciation and amortization included in
income from operations is related to operating segments or corporate expense. Costs are allocated to operating
segments or corporate expense according to the function of each cost center.
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